After coming across (for the umpteenth time) an inspiring article about people starting businesses in their late working years or in their “expected” retirement years (The Rise of the Boomer Entrepreneur – Financial Post), I thought I would share my 2c on this because, for many, income from “human capital” – meaning the capital that is YOU, you being your best asset – can be a significant AND rewarding source of retirement security.
As a Retirement Management Analyst (RMA), and a member of the Retirement Income Industry Association (RIIA), approaching retirement income planning from a perspective different from what many consider is the traditional way, I view working income, and more excitingly, business income, as a huge part of the retirement planning process.
Let’s quickly review the 3 generic categories of income (according to RIIA research) that we plan with when determining a retirement income plan:
Social capital is typically shared guaranteed income sources such as social security and pensions. Income that comes from group contributions.
Financial capital means investments, liquid assets (liquid = assets that can be sold easily) such as stocks, bonds, CD’s and such. It’s capital that is held in financial markets.
Human capital is us – it’s the abilities, skills, mind and body that we possess. And that asset can produce income. For example, if you can work part time making $16,000 per year, that’s the same as a $320,000 account earning 5% annually! And many people discount or under-appreciate human capital.
[Note: If you can not work due to illness or disability, I apologize for directing this article to people who can work. Though my cousin Christie, who suffered with MS, was determined to go to college (which he did) and work! Even though Christie was taken from us last year in his mid 30s, he is still a tremendous inspiration to others with disabilities.]
The article above from the Financial Post talks about a fellow named Michael Morris, who worked in fashion for 40 years but after was deemed unattractive in the work force due to his age. he started a consultancy business that he is taking to the next level. And he is not alone – most of the people I work with do not want to shut down at 65, they want to continue to do something fun – maybe different from their current line of work – but maybe more challenging and REWARDING. From the article:
Given our long life expectations and medical advances, even leading edge Boomers like Morris who are now 65 or 66 are too young to completely stop working, even if they could afford it. Boomers may be leaving the corporate grind – voluntarily or not — but few wish to be put permanently out to pasture.
The underline is mine – and this reflects what I mentioned above – people want to contribute and do satisfying work. The key for boomers is to think differently – for example, again from the article:
Evans argues it’s time boomers got paid for what they know, rather than what they do. “No one can afford to hire boomers fulltime for what they’re worth but they can hire them to be part of their strategy and get the leverage of their rich experience.”
This quote is spot on. If you were laid off, it is highly possible that you will not get a new job doing the exact same thing. And if you did, it likely will pay less.
Therefore different thinking is in order. Here are some ways to think differently particularly if you are going to market yourself as a consultant/niche player:
you have skills and KNOWLEDGE – how can you leverage that? Who needs that knowledge? Maybe a young entrepreneur could use experience? Maybe a company needs a niche part time employee, perhaps for a limited time?
when thinking of lending your knowledge, understand that this is an expensive economy and that, for example, start-up capital is precious. I don’t care what BS comes out of Washington – it is EXPENSIVE to hire a worker, especially if the company self funds growth or the founders fund it (much easier when an outside investor throws $3 million at the company to hire people). Therefore, offer to work as a CONSULTANT, AN INDEPENDENT EXPERT. This will be perceived as less risky to a company, and they won’t have to go through the mess of official payroll, paying unemployment taxes, FICA taxes, employment agreements, etc. Think from THEIR perspective, not yours – what if you were starting a company – would you pay a boomer (often coming from higher paying job) their old salary plus benefits (60-100,000 dollars) out of YOUR POCKET? If you think that way, you will appreciate their position more. And maybe you’ll help them to a point where they HAVE TO hire you full time:)
If you are working as a consultant, work for multiple people – be a true consultant. This is how you turn consulting into a full time gig. Don’t get hung up on one client. Keep hunting!
Charge a SOLID fee: You may find that you can charge more per hour because of limited hours and because they don’t have to pay your benefits. Small companies that want your expertise might look more at total cost for the work done – so for example, you charge $6,000 hypothetically for consulting work – and let’s say it takes you 30 hours to do the job – that’s $200 per hour! The company isn’t looking at the hourly rate in every case, they may just be looking at total outlay and your $200/hr fee might fit into their budget just fine.
The Bottom Line
Think differently, creatively and positively about your situation. You HAVE assets – your human capital is very valuable due to your experience and (I didn’t mention this) your enormous advantage over younger people in interpersonal communications (young people growing up online chatting are in for a shock in a business world that requires face to face communication!), and your honed skills.